DeFi

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 <p>As the trial of Avraham Eisenberg gets underway in the US, the legal credibility of decentralized finance (DeFi) as an autonomous financial system is at stake.</p>
 <p>Eisenberg is accused of fraud after extracting around $112 million from the Mango Markets protocol in 2022.</p>
 <p>The implications of the case are very different from the trial of Sam Bankman-Fried, which didn’t set any new precedents; fraud and money laundering are always illegal.</p>
 <p>Yesterday, during opening statements, Eisenberg’s lawyer argued that <a rel="noopener noreferrer nofollow" title="Mango Markets" href="https://thebittimes.com/tag/mango-markets.html">Mango Markets</a> worked as designed and that Eisenberg simply “<strong>executed a winning trading strategy</strong>.”</p>
 <p>This argument is often made in the wake of <a rel="noopener noreferrer nofollow" title="DeFi" href="https://thebittimes.com/tag/defi.html">DeFi</a> exploits and boils down to the controversial idea that <a rel="noopener noreferrer nofollow" title="‘code" href="https://thebittimes.com/tag/code.html">‘code</a> is law.’</p>
 <p>The defense points to the automatic liquidation system as evidence that users do not need to commit to paying back loans that are taken out on the platform. This argument implies that losses were instead caused by the platforms’ poor risk management, allowing the use of its own (relatively illiquid) governance token as collateral, rather than criminal exploitation of the protocol.</p>
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    <p lang="en" dir="ltr">OK – next crypto criminal trial, US v. Avi Eisenberg about Mango Markets, begins now with opening arguments. Inner City Press has covered the case from the beginning (and jury selection https://t.co/J194wBHAyi) and will live tweet, thread below https://t.co/txhEhR3lhw pic.twitter.com/o5MvQMxn9e</p>— Inner City Press (@innercitypress) April 9, 2024
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 <h2 class="wp-block-heading" id="h-is-code-law">Is code law?</h2>
 <p>Crypto lawyer and commentator Gabriel Shapiro underlined the importance of the case, suggesting the community is overlooking the potential implications for <a rel="noopener noreferrer nofollow" title="DeFi" href="https://thebittimes.com/tag/defi.html">DeFi</a> as an autonomous financial ecosystem.</p>
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    <p lang="en" dir="ltr">this is a much more important case to the future of crypto than SBF or Terra, but y'all are sleeping on it. . . <br><br>ask yourself: if courts can post hoc contravene the results of autonomous code, is autonomous code essentially illegal? the whole idea is finality, immutability… https://t.co/AV4LQt8FwZ</p>— _gabrielShapir0 (@lex_node) April 9, 2024
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 <p><em>Read more: Market manipulator liquidated trying to short Curve</em></p>
 <p>Seemingly finding common ground with Eisenberg’s lawyer’s claims, Shapiro states “there was no bug actually … code worked exactly as intended.”</p>
 <p>However, rather than claiming Eisenberg is innocent of market manipulation, Shapiro takes issue specifically with the idea that Eisenberg’s actions “breached a loan agreement implied by the smart contracts.”</p>
 <p>That “simply misunderstands <a rel="noopener noreferrer nofollow" title="DeFi" href="https://thebittimes.com/tag/defi.html">DeFi</a>” he goes on, and would “create a precedent where users need to pay back bad debt to credit protocols.” They may be at fault themselves, for example by using poor risk management.</p>
 <h2 class="wp-block-heading" id="eisenberg-s-shady-past">Eisenberg’s shady past</h2>
 <p>Eisenberg characterized his actions as ‘a highly profitable trading strategy’ at the time.&nbsp;</p>
 <p>Using $10 million of his own funds to pump the price of MNGO tokens on the platform, Eisenberg then <strong>borrowed all the assets on the platform against the artificially inflated position</strong>.</p>
 <p>He later negotiated with the Mango Markets DAO to return a portion of the funds, on the condition that they would not press charges.</p>
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    <p lang="en" dir="ltr">What are you gonna do, arrest me?</p>— Avraham Eisenberg (@avi_eisen) October 19, 2022
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 <p>Despite claiming his innocence, Eisenberg fled the continental US the day after the attack. He was later arrested in Puerto Rico.</p>
 <p>As well as the Mango Markets incident, Eisenberg was accused of foul play related to other DeFi projects, and attempted to profit by targeting Curve Finance founder Michael Egorov’s CRV positions on Aave, <strong>before getting liquidated</strong> as holders rallied round the token.</p>
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    Who is Avraham Eisenberg and why is he all over Crypto Twitter?
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 <p><em>Read more: FBI found child porn on Avraham Eisenberg’s phone, court docs say</em></p>
 <p>Following his arrest, Eisenberg’s already unsavory reputation took a further nosedive when FBI investigators stumbled upon alleged child pornography while searching his cellphone.</p>
 <p>Full, live coverage of the case can be found via Matthew Rusell Lee, aka Inner City Press.</p>
 <p><em>Got a tip? Send us an email or ProtonMail. For more informed news, follow us on&nbsp;X,&nbsp;</em><em>Instagram</em><em>,&nbsp;</em><em>Bluesky</em><em>, and&nbsp;</em><em>Google News</em><em>, or subscribe to our&nbsp;</em><em>YouTube</em><em>&nbsp;channel.</em></p>
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<p>Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/what-does-avraham-eisenberg-s-code-is-law-defense-mean-for-defi-tbt86253.html">https://thebittimes.com/what-does-avraham-eisenberg-s-code-is-law-defense-mean-for-defi-tbt86253.html</a></p>

What does Avraham Eisenberg’s ‘code is law’ defense mean for DeFi?

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